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To make a long story short
Sea view
For the Oljefondet, or Norway’s pension fund abroad – which is the official name, 2023 was a record year.
They received the highest ever krone return of 16.1 per cent – which amounts to NOK 2,222 billion.
– Very positive
This despite the fact that many, including oil fund manager Nicolai Tangen himself, believed that it could turn out to be a demanding year, characterized, among other things, by great geopolitical tension.
– I think that what made it better than expected was that inflation came down more than many had feared. It was at a very high level when we entered the year, but then it came down. So I think what has happened in the technology sector – with artificial intelligence – has really taken off here and had an effect on the courses, says Tangen to Børsen.
– Must dig deep in their pockets
The figures prove the oil fund’s manager is right. The oil fund’s investments in technology shares gave a return of 21.3 per cent last year.
– Artificial intelligence is positive for the market, because you imagine that you can become more productive and get more out of what you do, Tangen points out.
The big question then is whether this is a tree that continues to grow towards the sky, or whether you can get an emergency brake here eventually.
– What happens in artificial intelligence is very real. I think the effect will come, but it may take some time. The question is what happens to the valuation of these companies, says Tangen, who points back to the dotcom period, or the “dot com bubble” as it is most often referred to.
Bankruptcy race: Strong increase
– Had the whipping
There was a period from 1995 to 2001 when the stock markets in Western countries experienced a tremendous growth in the then brand new internet sector, when a large number of new online companies, referred to as dot com companies, were established.
In 2001, the bubble burst, and many companies were closed down or declared bankrupt.
Tangen has that in mind when he talks about the future of artificial intelligence.
– It was real that there was going to be a change in technology, but it took ten years. In the meantime, the shares fell in value. That’s the kind of thing we’re looking at now.
But artificial intelligence is not just something that the Oil Fund directly or indirectly invests in – it is also used as a useful work tool in their daily work. Tangen believes they can use it even more in the future.
– Absolutely. We use it in many different ways. We use it on how we invest our money and how we can reduce it on the internal trading we do. I walk around here with a whip and say that everyone should become 20 per cent more productive, says Tangen, before giving Børsen’s emissary a wry smile:
– So you can be glad you don’t work here. Then you would have been whipped.
Reprimands the central bank: – Slaves of the krone exchange rate
Can lose 5000 billion
The rise in the share markets in general in 2023, and especially at the end of the year, has continued into January.
Where the Oil Fund was worth 15,764 billion at the end of last year, the value has now risen to just over 16,200 billion at the time of writing.
This does not mean that Nicolai Tangen, and his second-in-command Trond Grande’s analyses, can state that there will only be sunshine and upswings in the future.
– We never usually just report good weather, says Grande, before Tangen chimes in:
– We report a lot of rain.
And they have slowly tried to envisage some rough weather when they published some stress tests today – three scenarios – which show what can happen to the fund and what it will mean for the fund’s value.
– And the scenarios we have presented suggest that the fund, in a three to five-year term, could fall by 30 – and well then – per cent, says Grande.
In kroner and øre, such a drop amounts to around 5,000 billion. Two of the scenarios are macroeconomic and one is geopolitical, and it is by no means unlikely that either of them will occur.
– It is certainly a real possibility. Imagine that the stock market went up 20 percent last year. Then a drop of 40 per cent is certainly not improbable, states the oil fund manager.
– Many are holding their breath
– The unexpected
The geopolitical uncertainty is not only about the two wars that have characterized the world in the last two years – the war in Ukraine and the war in Gaza – but also about, for example, the relationship between China and the United States.
Nevertheless, it is not war in itself that is the biggest challenge for the Oil Fund.
– There are some wars that will be very bad for the world economy, but the most challenging are the things we don’t know about. We did not foresee the financial crisis coming. We did not envision covid. It’s the kind of thing that you haven’t thought about at all that can really turn out negatively, says Tangen, and states that those things “keep coming up”.